LEXINGTON, Mass.—The brief announcement might have receivedlittle notice, taken alone: "Predictive Biosciences will cease to operate andwill lay off 91 employees because an insurance company contracted by Medicarewill no longer cover the company's bladder cancer diagnostic." But themodest-sized company, which also ran a lab in Cleveland, tuned out to be farfrom alone.
When business results for the second quarter were madepublic, cancer genetics diagnostic company NeoGenomics of Fort Myers, Fla.,reported flat revenues for the second quarter, "as changes to Medicare'sreimbursement for molecular diagnostics negatively impacted operations," citinglost revenue of about $275,000.
Similar complaints were articulated by Sequenom and Luminex,which also said the changes to billing and payment codes related to moleculartests adversely affected their revenues during the second quarter. Late lastmonth, New York-based Sequenom said it was reducing its head count by 75employees, blaming the dip in revenues on a change in molecular billing andpayment codes that delayed payments on testing services. Sequenom CEO HarryHixson said the company may cut back on testing services for which there is nocurrent reimbursement available.
How did this situation come about? No, it isn't due to theAffordable Care Act, although it has roughly paralleled Obamacare in itsprogression through time. Noel Doheny, CEO of the U.S. subsidiary ofEpigenomics AG of Frankfurt, Germany, a cancer diagnosis company, explains itthis way: When molecular diagnostics first came to market, "stacking codes"were created for reimbursement purposes. There were about 20, and Doheny citesexamples such as DNA extraction, amplification, hybridization and analysis. Butcodes were not specific to diseases. Instead, labs said, "These are the stepsin my assay, and I'm going to bill for them."
But as molecular diagnostics became more differentiated bydisease and more complex, the government reached out to physicians forclarification. In 2010 and 2011, a taskforce led by Dr. Mark S. Synovec, aboard-certified pathologist with the Topeka Pathology Group, began work on whatbecame a two-tier set of codes for specific diseases. In November 2011, theysubmitted their recommendations. Medicare said local Medicare intermediaries—calledMACs—could handle implementation.
"Because the government punted," Doheny laments, "stackingcodes were eliminated, nothing existed to take their place and cash flow driedup. Labs, jobs, access to care all ceased to exist."
Dr. Bruce Quinn, senior health policy specialist with FoleyHoag LLP, a Boston-based law firm, has been closely following the coding andcompensation dilemma and has provided DDNews with a key document in which the Coalition to Strengthen the Future ofMolecular Diagnostics (CSFMS) sent a four-page comment letter to the Centersfor Medicare & Medicaid Services (CMS). The coalition, which comprises 37organizations ranging from Big Pharma to testing labs and venture capitalists,is "unified in our concern over interim 2013 MAC reimbursement rates formolecular diagnostic testing." CSFMS points out, "the rates posted represent asignificant cut in payment for many critical tests by an average of about 20percent—and as high as 80 percent in some cases."
Inveighing on patients' behalf, the group notes that whilecomprising less than 1 percent of total Medicare spending, "this criticaltesting ensures that patients get appropriate treatment and that Medicaredollars for costly therapies are spent treating patient who may benefit fromthe treatment. Advances in molecular diagnostics enable personalized medicine …that uses diagnostic tools to identify specific biological markers, oftengenetic, and help assess which medical treatments and procedures will be bestfor each patient. Knowing how a patient might respond at a molecular level to aparticular treatment allows physicians to determine the best course of care atgiven points of time, enabling appropriate therapies to be administered anddelivering better care more efficiently, cost effectively and saving lives."